There is an article out there, that details the cost of developing a new drug in the 60-70 million range, minus the government help like tax incentives and development grants. I spent 27 years in pharmaceutical R&D. I guarantee that $60-70 million drugs are few and far between. $600-700 million is more like the average. And the cost of discovering the drug, where government labs or academia may play a part, is a minor part of the total cost. It is the 2 week, followed by 4 week, followed by one year, toxicology and pathology studies, each in 3 species, followed by lifetime (~3 year) carcinogenicity studies in rodents, and the phase I, II and III and sometimes IV clinical studies, none of which the government helps with that add up to hundreds of millions of dollars.
I'm not going to spend the time hunting up the $60-70 million story, but this along with others, was not hard to find. ( Google: drug development cost )
Drug prices in the United States are out of control, and rising.
http://lists.essential.org/pipermail/corp-focus/2002/000118.html "The Tufts-industry estimate is for the cost of new chemical entities for which the industry was wholly responsible -- that is, where there was no substantial public contribution to R&D.
It turns out, however, that the vast majority of new drugs Big Pharma brings to market do not involve new chemical compounds. A May 2002 study by the National Institute for Health Care Management (NIHCM) Foundation found that two-thirds of the prescription drugs approved by the FDA between 1989 and 2000 were modified versions of existing medicines or identical to drugs already on the market (and only about 15 percent were both new and deemed by the FDA to provide significant improvement over existing medicines). Pharma denies it, but there is every reason to believe these less novel products are far cheaper to bring to market.
Then there's the not insignificant fact that the case of drugs brought to market without government support is the exception, not the norm. The federal government supports an enormous amount of research, and funds the earliest and riskiest portions of the R&D process: basic research and the earlier phases of clinical trials.
Finally, the Tufts-industry figures seem to wildly inflate the cost of clinical testing. Looking at company filings with the IRS for tax credits on research for "orphan drugs" (drugs which treat small populations), however, the Consumer Project on Technology found that --
adjusted for risk -- drug companies report expenditures of only $7.9 million on clinical trials, less than 1 percent of the overall estimate.
Even if the costs for this category of drug are below average, as the industry claims -- even if they were, implausibly, a tenth of the average -- this would still suggest a much lower total development cost than the Tufts-industry estimate."